Business Plan for The Southwest Regional Spaceport

Executive Summary ...... 3 Preface...... 5 1.0 Introduction...... 6 2.0 Development Opportunity ...... 7 2.1 Market ...... 7 2.2 Economic Impact Analysis ...... 9 2.2.1 Measurable Economic Impact ...... 9 2.2.1.1 Space Commercialization Pyramid...... 9 2.2.1.2 Construction and Operations Impacts...... 11 2.2.1.3 X-Prize Cup Impact ...... 11 2.2.1.4 Suborbital Operations Impact ...... 12 2.2.1.5 Orbital Operations Impact...... 14 2.2.1.6 Tourism Impact ...... 14 2.2.2 Conceptual Economic Impact ...... 14 3.0 New Mexico’s Space Assets...... 15 3.1 Southwest Regional Spaceport...... 15 3.1.1 Background...... 15 3.1.2 Project Description...... 16 3.1.3 Description of End-State Spaceport Facilities...... 16 3.2 Aerospace Infrastructure ...... 16 4.0 Situational Analysis ...... 19 4.1 Political, Economic, Social, and Technological Environment ...... 19 4.1.1 Political Forces ...... 19 4.1.2 Economic Forces ...... 19 4.1.3 Social Forces ...... 20 4.1.4 Technological Forces ...... 20 4.2 Competitive Environment...... 21 4.3 Strengths, Weaknesses, Opportunities, and Threats...... 22 4.3.1 Strengths ...... 23 4.3.2 Weaknesses ...... 24 4.3.3 Opportunities...... 24 4.3.4 Threats ...... 24 5.0 Planning Framework...... 25 5.1 Mission...... 25 5.2 Vision ...... 25 5.3 Goals and Objectives...... 25 6.0 Tactical Considerations ...... 26 6.1 Marketing ...... 26 6.1.1 Segmentation...... 26

1 6.1.2 Services ...... 26 6.1.3 Promotion ...... 27 6.1.4 Action Items:...... 28 6.2 Legal ...... 28 6.2.1 Regulatory and Licensing Issues...... 28 6.2.2 Liability Issues ...... 30 6.2.3 State Opportunities to Create an Attractive Legal Environment ...... 33 6.2.4 Action items:...... 34 6.3 Financial and Investment...... 34 6.3.1 Potential Sources of Capital ...... 35 6.3.2 Infrastructure and Operational Capital Requirements...... 37 6.4 Operations ...... 39 6.4.1 Management...... 39 6.4.2 Facility Management ...... 40 6.4.3 Ancillary Management...... 40 6.4.4 Action items:...... 41 7.0 Summary and Conclusions...... 41

List of Tables and Figures

Table 1 - Estimated Suborbital Flights by Year ...... 12 Table 2 - Economic Impact of Estimated Suborbital Flights on the New Mexico Economy ...... 13 Table 3 - Aerospace Manufacturing: New Mexico Vendors ...... 18 Table 4 - SRS Financial Plan Spreadsheet Model Breakeven Revenue Results and Assumptions ...... 38

Figure 1 - The Commercial Space Pyramid...... 9

2

Executive Summary

New Mexico has a history of leading the The Southwest Regional Spaceport world into space. Goddard conducted currently is receiving attention as the early liquid fuel rocketry experiments in home of the X Prize Cup Competition. New Mexico. White Sands Missile Range Starting with a single one-day event, it in south-central New Mexico was will eventually grow to a multi-day selected as the site to launch the extravaganza with significant economic captured German V-2 rockets after impact. For the first year of the X Prize World War II. The first true space Cup Competition the estimated exploration was conducted using those operating expenditures are $10,488,000. modified V-2 rockets. Now is an This would generate additional spending opportunity to build upon and enhance of over $8 million and generate total this legacy. earnings of about $4.4 million. By year five, the estimated expenditures increase Commercial space represents the latest to almost $21 million and the impact to stage in the millennia-old evolution of approximately $16 million of additional transportation systems. And, as in times spending and $8.8 million in earnings. past, governments will have to invest in the requisite infrastructure for the Depending on the development scenario industry to thrive and economies to actually realized, New Mexico could be grow. History teaches us that those who home to as few as 17 commercial flights judiciously invest are rewarded, while per year (New Mexico captures 25 those that do not are typically left to percent of the FAA/AST constrained languish. estimate) and as many as 375 flights per year (New Mexico captures 75 percent of In scrutinizing the various indicators of the FAA robust estimate). If the industry market segment attractiveness, and New Mexico hold to the current tack numerous sources point to the space of pursuing safety and delaying tourism industry. This is the only space commercial launches until the activity that can support a high number technology is proven, the former of flights which is essential to bringing scenario will be attained in the short run. costs down. And if costs are reduced, This short run strategy however, wil there should be opportunities for taking allow the latter scenario to become more advantage of other benefits from space, and more likely in the long run. In fact, such as developing the solar electricity some of the operating plans for industry. NASA and the U.S. Space companies interviewed in compiling this Transportation Association have analysis suggest that it might be possible published a report acknowledging that to realize even faster growth, space tourism was likely to start soon particularly after 2010. and could grow into the largest activity in space. It is estimated that space Conservatively, over the next five years tourism will generate at least $1 billion a the New Mexico Spaceport could year within 20 years. generate more than $5 million of initial spending, which would be multiplied

3 into nearly $10 million of additional development opportunities are, the output, and nearly $3 million of earnings educational benefits of the new space in the private sector. At this level of industry being located in New Mexico activity, high-tech and high-paying jobs cannot be underestimated. The would be created to support commercial Southwest Regional Spaceport and operations at the Southwest Regional ancillary industries surrounding the Spaceport. spaceport will provide local role models embodying the opportunities available to Optimistically, and there is room for those with higher education in New optimism given the business interests Mexico and the country. considering New Mexico as a base of operations, the impact could be far To realize this opportunity, New Mexico greater. Suborbital operations at the must have a roadmap for the Southwest Southwest Regional Spaceport could Regional Spaceport. As reflected in the generate additional economic output of far-reaching, yet attainable mission and $212 million and earnings of $63 million vision statements, the SRS is setting the over the next five years. This level of stage for a new wave of economic activity would create and sustain more development. than 600 new jobs as a direct result of sub-orbital commercial operations at the Mission New Mexico Spaceport. The Southwest Regional Spaceport will be the premiere American spaceport of Even before being operational, the the second space age. Southwest Regional Spaceport will have a positive economic impact on the State. Vision Construction, by itself, will not be trivial. The Southwest Regional Spaceport will Using accepted impact models, forecasts be the vehicle to open the space frontier predict that for every $60 million in to all citizens, will bring new companies construction spending, the total impact and jobs to New Mexico, increase will be over $120 million, with earnings tourism statewide and help brand New multiples in excess of $40 million and Mexico as the place to experience the supporting more than 1,450 new jobs. future. Constructed in controlled phases, it is reasonable to project that over the next Specific marketing, legal, financial, and five years, more than $250 million will operational steps must be taken to be spent to build out the spaceport with realize the Spaceport vision and mission. funds coming from a variety of sources, For nearly 15 years, New Mexico has this could mean more than $480 million been positioned to take a leadership role in total economic impact, with earnings in the space age of the 21st century. multiples in excess of $160 million, While there are obstacles to overcome creating and supporting an average of and risks to be addressed, the time for 1,450 jobs each year during buildout of waiting is over. The Southwest Regional the spaceport. Spaceport is an exciting educational resource, a prestigious landmark, and an As important as the business growth, the economic development opportunity for business development, and the economic the State of New Mexico.

Southwest Regional Spaceport 4-41 Business Plan Preface

The Arrowhead Center (AHC) at New Center especially appreciates the efforts Mexico State University was contracted of and input from Peter Diamandis at by the New Mexico Economic this meeting. Nearly two-dozen people, Development Department to develop and representing more than 10 companies deliver several reports and services and entities associated with the new relative to the Southwest Regional commercial space industry, provided Spaceport. Foremost among them were valuable insight. A second summit was a strategic analysis of the commercial held in Santa Fe from July 20 – 22, 2005. space industry and a business plan for Over the course of two days, the the spaceport to realize the Arrowhead Center research team heard opportunities inherent to the industry. from those in the industry about In compiling both documents, the opportunities, threats, markets, research team from Arrowhead Center regulatory issues, and risks that confront conducted extensive secondary research, them and us. The information gathered interviewed local businesses, and from the summits (detailed separately), conducted two planning summits. The interviews, and bibliographic research first summit, held July 8 and 9, 2005 in formed the basis of the strategic analysis Las Cruces, was facilitated by and held in (detailed separately). The business plan, conjunction with a planning meeting of excerpted from and based upon this the X Prize Cup Foundation. Arrowhead research, is presented herein.

Southwest Regional Spaceport 5-41 Business Plan understood that the federal government 1.0 Introduction would never be fully repaid for the It is appropriate that the Southwest millions of acres of federal land given to Regional Spaceport be built in New the railroads. Instead, Lincoln Mexico. New Mexico has a history of understood that the construction of the leading the world into space. Dr. Robert railroads was crucial to economic H. Goddard conducted his early rocketry development. The construction of experiments in New Mexico. White railroads required an efficient iron and Sands Missile Range (WSMR) in south- steel industry which in turn required a central New Mexico was selected as the massive coal industry and many other site to launch captured V-2 rockets after industries. If government helped finance WWII. The first true space exploration the railroads, the other industries would was conducted using these rockets. grow on their own. Not only that but WSMR is still one of the busiest launch the railroads would open up new facilities in the U.S. markets for many other industries and make all industries more efficient. This is now the opportunity to build Lincoln was relying on what economists upon and enhance this legacy. now refer to as forward and backward Commercial space represents the latest linkages. Economic historians recognize stage in the millennia-old evolution of that railroad building was one of the transportation systems. And, as in times most important factors in U.S. economic th past, governments will have to invest in development in the 19 century. the requisite infrastructure for the industry to thrive and economies to The construction of railroads was not the grow. History teaches us that those who end of government involvement in th judiciously invest are rewarded, while transportation systems. In the 20 those that do not are typically left to century states and municipalities languish. subsidized the development of the automobile and trucking industries by From the earliest years of the nation, constructing roads at public expense. governments (state, local, and federal) Government recognized that a system of have invested in the development of private roads (toll roads) would hinder transportation systems in partnership the development of the economy while with the private sector. The construction public roads would help provide efficient and sometimes the operation of early transportation for all. Today, the 19th century canals and harbors in what National System of Interstate and is now the Eastern U.S. were often paid Defense Highways is generally regarded for by state and municipal governments. as one of the most successful public works projects in history, fostering By the 1840s, states and cities were economic development and enhancing subsidizing the construction of railroads. the national defense of the United In 1862 Abraham Lincoln (a lawyer and States. On August 10, 2005, President lobbyist for the railroads in an earlier Bush signed a $286 billion career) signed the Act that ultimately transportation bill to provide subsidies resulted in the construction of the trans- for the construction of public continental railroad system. Lincoln transportation systems including

Southwest Regional Spaceport 6-41 Business Plan highways, commuter rail systems, and investing in and managing spaceport other forms of transportation. Bush infrastructure as a development signed the bill in Chicago at a Caterpillar proposition. plant to emphasize the forward and backward linkages of spending on transportation! 2.0 Development Opportunity

Government also played a vital role in 2.1 Market the development of commercial air In scrutinizing the various indicators of service. Early airports were often market segment attractiveness, constructed by cities in the hope that numerous sources point to the space they could attract air service to their tourism industry. At present, tourism is a localities. The cities understood that large business, exceeding $400 billion they would not directly receive enough yearly in the U.S. alone and serving as money from air carriers to pay for these the second largest employer. There is a investments, but would instead recoup general public interest in space from the their investment by the attendant sheer volume of people who patronize economic development. Recognizing its space museums, attend space camps, economic and defense capabilities, the visit launch sites, and purchase space federal government subsidized early related merchandise. This is the only airlines through contracts to provide space activity that can support a high mail service as a means of encouraging number of flights, which is essential to improvements of technology and bringing costs down. And if costs are nurturing the fledgling industry. Even reduced, there should be opportunities now, the airline industry is highly for taking advantage of other benefits subsidized by government. Small from space, such as developing the solar commuter airlines are often subsidized electricity industry. For new space directly to provide service to smaller companies, it is difficult to cope with the markets by a combination of federal, inherent risks which arise. Without cash state and local governments. Perhaps flow, no company can stay in business. It more importantly, the development of is vital to build up activities which aircraft technology has been highly generate large cash flow as soon as subsidized since World War I. possible. The most effective way to do

this appears to be tapping large scale In short, governments at all levels in the consumer markets using the techniques U.S. have always invested in of successful commercial activities. NASA transportation systems. The commercial and the U.S. Space Transportation space industry will require an investment Association have published a report in necessary infrastructure no matter acknowledging that space tourism was where the most active spaceports are likely to start soon and could grow into located. New Mexico has an opportunity the largest activity in space. to be in on the industry from the start.

The commercial space industry could, like Studies ranging as far back as 1994 the railroads a century and a half ago, suggest that large numbers of potential transform the economy. And, as in times tourists are interested in the space past, New Mexico must evaluate

Southwest Regional Spaceport 7-41 Business Plan tourism industry. It is estimated that passengers in the first five years of space tourism will generate at least $1 flying. Some experts venture the opinion billion a year within 20 years. Several that his firm—Virgin—has the best very successful entrepreneurs including technology in the industry. Richard Branson (Virgin) and Jeff Bezos (Amazon.com founder) have made One team of space researchers has commitments to this industry. Virgin conducted estimates of future demand wants to be the world’s leading space for space tourism. From surveys of the tourism company and has signed a U.S., Japan, and Europe, they propose contract to license the technology that if the price of a ticket to low earth behind Space Ship One. Jeff Bezos plans orbit could be reduced to between to build a spaceport for suborbital $10,000 and $20,000 per person, about vehicles on a range near Van Horn, Texas 100 million people would wish to make and construct a three person ship that such a trip. The world-wide demand would take off, go suborbital, and land would reach one million passengers per vertically. Generally, the Space Ship One year or more, generating revenues of accomplishment has opened up the $10 billion or more. In order to make this market for space tourism because it has possible, the economies of scale possible indicated that such endeavor is possible from accessing the entire global market at a reasonable cost and probably within would be very important. Business an acceptable range of risk. competition between tourism operators could be expected to progressively There are indicators of demand for space increase demand and decrease costs. tourism. Many airlines have received Knowledgeable persons in the industry thousands of letters from people asking have indicated that when the next about the availability of trips to space generation technology becomes (Collins,1991). A statistic of interest is available, the cost per person for trips that 2.8 million visitors entered the should fall into the level of tens of Florida spaceport in 2000 (Florida Space thousands of dollars. Critical advances Authority, 2005). Worldwide, consumers have been made during the past decade spend in excess of $3 billion annually in in many of the technologies that can space related products and services enable non-astronaut human space (Good, 2005). Peter Diamandis, a space travel to become both technically and travel entrepreneur, recently launched economically feasible and more are. commercial zero gravity flights. These take place on 140 minute parabolic Projections of the industry to 2030 flights aboard a Boeing 727-200 that has suggest substantially increased growth. been modified by Diamandis’ firm. The One authority indicates that this growth fare is $3,000 and 600 tickets have been would occur as a result of rising incomes sold (Stern, 2004). Eric Anderson heads a and growing middle classes around the firm which has flown 2,000 customers world. On this basis, passenger numbers on suborbital flights for $19,000 in a traveling to low earth orbit of 5-10 MiG-25 Foxbat. His revenues in 2004 million per year in 2030 would imply were $15 million, netting $1.5 million. average growth rates of 18% to 26% a Richard Branson has forecasts suggesting year as feasible. Also possible are that his firm could carry 3,000 scheduled daily flights to supply as many

Southwest Regional Spaceport 8-41 Business Plan as 100 hotels (with 30,000 to 80,000 illustrates the impact that would occur if guests) and 20 specialized sports centers, the space tourism market is in fact comprising of accommodations and a realized. As one moves down the stadium, for both users and spectators, pyramid the number of jobs that would in orbit. be created to support each segment of the market gets larger. 2.2 Economic Impact Analysis 2.2.1 Measurable Economic Impact At the top of the pyramid are those The direct impact of spending in the customers that are actually going to pay space industry generates a multiplier to go into space. The cost to the effect on the rest of the state economy. consumer is estimated to be about These multiplier effects can be estimated $200,000. While the industry hopes that using input output programs such as the number of individuals going into IMPLAN and RIMS II, two widely used space is large, from the viewpoint of the programs. The RIMS II program for New state, these individuals represent only a Mexico indicates that for every one small portion of the industry. dollar of additional spending in the guided missile and space vehicle Those individuals going into space will manufacturing sector an additional have to go through training before the .7079 dollars of spending occurs in the flight. That flight training does not have rest of the economy. The amount of to be at the spaceport. In fact it may earnings that is generated is equal to take place somewhere else in the state. approximately forty-two percent of the More than likely family members will be initial spending. And for every one accompanying the person taking flight million dollars in initial spending in the and the location of training must sector, 11.58 full time equivalent jobs provide amenities to those family are created. members. Of course amenities will also have to be provided at the spaceport 2.2.1.1 Space Commercialization Pyramid because the whole family will be located Figure 1: The Commercial Space Pyramid there for the flight itself.

Figure 1 - The Commercial Space Pyramid

Space Passengers

Fam ilies

Viewers Jobs

Terrestrial Tourism

Ancillary Industries

Southwest Regional Spaceport 9-41 Business Plan

The third section of the pyramid commercial space will cut across a broad indicates that there will be those who spectrum of New Mexico’s work force. want to view launches. Thousands of people have watched the launches of the This is only one part of the industry. At space shuttle. However many come to least initially the space tourism model is watch what happens at this spaceport, built on low orbit flight. While some in they will be traveling through the state, the industry believe this will take place spending on food and lodging and very soon, it may take three to five years visiting other sites and cities throughout before flights take place. Before that the state. This is in addition to what time design, testing and evaluation must must be provided to them on site. take place. A similar pyramid can be At least in the beginning the number of constructed to illustrate the types and flights may not be very frequent. number of jobs that would be generated However there will be those that want to through this process. The realization of experience the idea of space flight and job creation under this scenario begins be willing to come to the spaceport just one to three years from the present. to see what it looks like. That is the next level of the pyramid. Again visitors to The actualization of high orbit flights is the spaceport may be visitors to other further in the future. Two more sights around New Mexico. This pyramids could be constructed. One of experience could be enhanced by the pyramids would illustrate the attractions on site and provision of research, design and testing part of the activities that would simulate space industry and the second would illustrate flight. The spaceport can be used to the tourism and commercial part of the anchor New Mexico’s position as the industry. The tourism and commercial place to visit space; even terrestrially. aspects may be realized ten to fifteen years in the future. It is possible that the The base of the pyramid represents the research, design and testing phase could number of ancillary industries that need start as early as six months from the to be present to support the present. In essence the spaceport should commercialization of space. These have an operation plan that would take represent the forward and backward advantage of both low and high orbit linkages that must exist for the success flights. of the operation. Design, fabrication and testing facilities must be built. Security, The educational value of the spaceport safety, food and lodging services must be will be an important by-product. provided. Fuel stations must be built and Interest in science, technology, contracts for provision and delivery need engineering and mathematics was at its to be negotiated. highest during the Apollo era. The commercial space industry and the SRS The result of this process is that a wide could have a positive effect on the variety of jobs will be generated, not state’s attempts to improve education only on site but across the state. and retention rates in K-16. Furthermore, the jobs sustained and created through the evolution of It is difficult to estimate the impact of

Southwest Regional Spaceport 10-41 Business Plan the spaceport and talk about the level of the home of the X Prize Cup economic activity it may generate. It is Competition. For the first year of the X clear that there is tremendous potential Prize Cup Competition the estimated and if even a part of the potential is operating expenditures are $10,488,000. realized, New Mexico could become the This would generate additional spending place to be to take advantage of the of just over $8 million and generate commercialization of space total earnings of about $4.4 million. By year five the estimated expenditures 2.2.1.2 Construction and Operations increase to almost $21 million and Impacts therefore the impact is approximately Even before being operational, the $16 million of additional spending and Southwest Regional Spaceport will have $8.8 million in earnings. a positive economic impact on the State. Construction, by itself, will not be trivial. With the Countdown to the X Prize Cup Using accepted impact models, we can Competition week recently concluded, forecast that for every $60 million in these numbers seem easily achievable. construction spending, the total impact The First International Personal will be over $120 million, with earnings Spaceflight Symposium drew more than multiples in excess of $40 million and 300 people. Next year, the Symposium supporting more than 1,450 new jobs. will expand to two days with a target audience of 400 people, with at least one Although being built out in phases, it is quarter coming from out of state. In not unreasonable to suspect that over addition, events at the airport, this year the next five years, more than $250 a single day event, which drew 20,000 to million will be spent to build out the the Las Cruces International Airport, is spaceport, funds coming from a variety scheduled to expand to two days with a of sources, which could mean more than target audience of 30,000. Education $480 million in total economic impact, Day activities associated with the with earnings multiples in excess of $160 Countdown to the X Prize Cup million, creating and supporting an Competition drew another 2,000 people average of 1,450 jobs each year during to Alamogordo. buildout of the spaceport. The Countdown to the X Prize Cup It has been estimated that the Competition is illustrative of the operational cost of the spaceport would potential economic impact of the be between one and two million dollars. commercial space industry in New This would also have an economic impact Mexico; catalyzed by the New Mexico on the state. For every one million Spaceport. While its immediate impact is dollars of operational expenditures an impressive, it can grow very quickly in additional spending of $708,000 will years to come, and it is not restricted to occur, $421,000 of earnings will be Las Cruces alone. Although precursory, it generated and 11.6 jobs will be created. is possible to estimate the economic impact of the commercial space industry 2.2.1.3 X-Prize Cup Impact in New Mexico even more broadly. The New Mexico Spaceport primarily is receiving attention, at least for now, as

Southwest Regional Spaceport 11-41 Business Plan 2.2.1.4 Suborbital Operations Impact commercial launch market. The FAA/AST has estimated the number of suborbital launches that will take Depending on the development scenario place through the year 2010 (“The actually realized, New Mexico could be Economic Impact of Commercial Space home to as few as 17 commercial flights on the U.S. Economy: 2002 Results and per year (New Mexico captures 25 Outlook for 2010”). They estimated the percent of the FAA/AST constrained number of launches in the world and estimate) and as many as 375 flights per allocated an amount of those launches year (New Mexico captures 75 percent of taking place in the U.S. under a the FAA robust estimate). If the industry constrained and robust scenario. The and New Mexico hold to the current tack constrained estimate assumed that ten of pursuing safety and delaying percent of all world launches would commercial launches until the occur in the U.S. The robust scenario technology is proven, the former assumed 75 per cent of the launches scenario will be attained in the short run. would occur in the U.S. The estimates This short run strategy, however, will are provided in Table 1: Estimated allow the latter scenario to become more Suborbital Flights by Year. and more likely in the long run. In fact, some of the operating plans for Just as the FAA/AST estimated low and companies interviewed in compiling this high market penetration of U.S. analysis suggest that it might be possible spaceports in the global suborbital to realize even faster growth, launch market, to gauge the potential particularly after 2010. impact in New Mexico, various levels of the Southwest Regional Spaceport’s Flight operations do not by themselves penetration of the domestic launch have any economic impact. To estimate industry must be assumed. Alternative this, requires an estimate of the amount scenarios were examined, including 25, of spending that would occur for each 50, and 75 percent penetration ratios of flight. the New Mexico Spaceport in the U.S.

Table 1 - Estimated Suborbital Flights by Year Year 2006 2007 2008 2009 2010 Total

# of world flights 253 321 411 522 666 2173 U.S. Flights (constrained estimate) 26 32 42 52 68 220 U.S. Flights (robust estimate) 190 241 309 392 500 1632 NM Flights (25% of constrained estimate) 7 8 11 13 17 56 NM Flights (25% of robust estimate) 47 60 77 98 125 407 NM Flights(50% of constrained estimate) 13 16 22 26 34 111 NM Flights (50% of robust estimate) 95 120 154 196 250 815 NM Flights (75% of constrained estimate) 21 24 33 39 51 168 NM Flights (75% of robust estimate) 141 180 231 294 375 1221 Source: FAA/AST, “The Economic Impact of Commercial Space on the U.S. Economy: 2002 Results and Outlook for 2010,” March 2004, and authors calculations.

Southwest Regional Spaceport 12-41 Business Plan It will be assumed that the amount of Economy. spending for each of these flights is $100,000. This is a low estimate Conservatively, over the next five years considering that most estimates for the the Southwest Regional Spaceport (SRS) cost of a flight are in the neighborhood could generate more than $5,000,000 of of $200,000. This amount includes the initial spending, which would be profits that would accrue to the multiplied into nearly $10,000,000 or companies and it will be assumed that additional output, and nearly $3,000,000 these profits will not stay in New of earnings in the private sector. Even at Mexico. These numbers do not include this level of activity, nearly 30 new jobs other spending that would occur by would be created as a result of family and friends that come to New commercial operations at the Southwest Mexico to witness the event. Regional Spaceport.

The estimated economic impact of Optimistically, and there is room for commercial operations in New Mexico is optimism given the business interests shown below in Table 2: Estimated considering New Mexico as a base of Economic Impact of Estimated operations, the impact could be far Suborbital Fights on the New Mexico greater.

Table 2 - Economic Impact of Estimated Suborbital Flights on the New Mexico Economy Year 2006 2007 2008 2009 2010 total 25% of Initial Spending (1000’s of $) 700 800 1,100 1,300 1,700 5,600 constrained Output (1000’s of $) 1,219 1,393 1,916 2,264 2,961 9,754 U.S. est. Earnings (1000’s of $) 364 416 572 676 884 2,912 Employment (# of jobs) 11.48 13.12 18.04 21.32 27.88 25% of robust Initial Spending (1000’s of $) 4,700 6,000 7,700 9,800 12,500 40,700 U.S. est. Output (1000’s of $) 8,186 10,450 13,412 17,069 21,772 70,891 Earnings (1000’s of $) 2,444 3,120 4,005 5,097 6,501 21,168 Employment (# of jobs) 77.08 98.40 126.28 160.72 205.00 50% of Initial Spending (1000’s of $) 1,300 1,600 2,200 2,600 3,400 11,100 constrained Output (1000’s of $) 2,264 2,787 3,8832 4,529 5,922 19,334 U.S. est. Earnings (1000’s of $) 676 832 1,114 1,352 1,768 5,773 Employment (# of jobs) 77.08 26.24 36.08 42.64 55.76 50% of robust Initial Spending (1000’s of $) 9,500 12,000 15,400 19,600 25,000 81,500 U.S. est. Output (1000’s of $) 16,547 20,901 26,823 34,139 43,545 141,957 Earnings (1000’s of $) 4,941 6,241 8,009 10,194 13,002 42,388 Employment (# of jobs) 155.80 196.80 252.56 321.44 410.00 75% of Initial Spending (1000’s of $) 2,100 2,400 3,300 3,900 5,100 16,800 constrained Output (1000’s of $) 3,658 4,180 5,748 6,793 8,883 29,262 U.S. est. Earnings (1000’s of $) 1,092 1,248 1,716 2,028 2,652 8,738 Employment (# of jobs) 34.44 39.36 54.12 63.96 83.64 75% of robust Initial Spending (1000’s of $) 14,100 18,000 23,100 29,400 37,500 122,100 U.S. est. Output (1000’s of $) 24,559 31,352 40,235 51,209 65,317 212,674 Earnings (1000’s of $) 7,333 9,362 12,014 15,291 19,504 63,504 Employment (# of jobs) 231.24 295.20 378.84 482.16 615.00 Source: Calculations by authors.

Southwest Regional Spaceport 13-41 Business Plan At its best, suborbital operations at the International Space Station or low earth Southwest Regional Spaceport could orbit. It has been estimated that four generate initial spending of more that flights per year would be required to $120,000,000 over the next five years, shuttle crews to the ISS and two flights resulting in additional output of per year to shuttle crews to low earth $212,000,000 and earnings of orbit. The estimated cost would be $63,000,000. If realized, this level of around $25 million per flight. This activity would create and sustain more would all be accomplished by 2015. The than 600 new jobs as a direct result of six flights per year would total $150 sub-orbital commercial operations at the million. This number could be viewed as New Mexico Spaceport. a revenue figure to the company providing the flights. Assuming a profit 2.2.1.5 Orbital Operations Impact margin of approximately thirty-three In addition, NASA will soon be asking for percent, the expenditure amount would proposals to develop a crew transfer be equal to $100 million. These flights vehicle to take crews to the International may not even originate at the SRS, but Space Station. That contract will be for because the company is located at the approximately $400 million over five SRS, some of this expenditure would be years. Contenders for this grant could impact New Mexico. A conservative use the SRS for research and testing. If spending estimate of $25 million would awarded to a company located at the generate a total impact of over $42.5 SRS, the initial impact of the contract million, an earnings impact of $10.5 could be $50 million over a five year million, and a generation of about 290 period. Assuming the same multipliers as jobs per year in 2015. before this would represent a total impact of $85 million, total earnings of 2.2.1.6 Tourism Impact $21 million and the generation of None of these impacts include the approximately 116 jobs per year. additional spending that would occur because of the ancillary businesses that Assuming that about half of the amount will be needed as the spaceport is is for research and design and that about developed or as a result of non-flight 25% of the remaining amount would be tourism associated with the spaceport. spent in New Mexico, the initial impact Tourism multipliers suggest that per of this contract on the economy of New 1000 tourists there will be 7.16 jobs Mexico would be $50 million over the generated, an earnings impact of five year period. Assuming the same $120,280, and total impact of $365,718 multipliers as before this would annually. represent a total impact of around $85 million and total earnings of 2.2.2 Conceptual Economic Impact approximately $21 million over the five The foregoing analysis is a realistic, albeit years and the generation of abbreviated, analysis of the spaceport as approximately 116 jobs per year. an enterprise at the micro level. The return, while positive absolutely, is still The successful development of this small relatively. To assess the true value vehicle will mean that it will be used to of the Southwest Regional Spaceport, we transfer crews and supplies to the must adopt a macro perspective, which

Southwest Regional Spaceport 14-41 Business Plan while difficult and only possible spaceport of the 21st Century. The world conceptually, suggests the actual space launch industry is in the midst of a potential return on the State’s paradigm shift as it changes its focus investment. On this basis, the Southwest from low volume, high cost operations Regional Spaceport becomes more (typified by launches of communications viable. It is what the spaceport can do satellites to geosynchronous orbits) to for the whole state that needs to be high volume, low cost operations considered, not just the returns directly (typified by suborbital space tourism attributed to the spaceport. launches). This change in focus necessitates a shift in space launch The spaceport is to be the base upon systems and architectures with a which a new industry is to be built. It corresponding shift in ground-based will provide facilities to take advantage infrastructure. The infrastructure shift is of sub-orbital flights, orbital flights and from the Government-owned spaceports point to point transportation. All of of today with their large inventories of these activities are in the development mission-specific equipment, much of it stage, some more advanced than others. dating from as long ago as the 1950s, to While initially the economic impact will a modern commercial site with be felt in Sierra County and Doña Ana adaptable equipment and facilities that County, the potential is for job creation serve multiple programs and that are throughout the state. It is also the case maintained to keep up with changing that the types of jobs created will not program requirements. just be for highly paid engineers. New Mexico’s spaceport development It is difficult to estimate the impact from program represents the first-ever effort a spaceport because no spaceport of this to develop a full service spaceport from type has ever have been developed. No the ground up. Although its economic model has been developed to development plan is phased to provide incorporate the impact of a spaceport or the infrastructure and support services commercialization of space industry only as they are required by the industry, because neither exists. The best that can New Mexico expects its spaceport be done is to think through the possible eventually to support both vertical and impacts. air launches in both suborbital and orbital operations. This document lays 3.0 New Mexico’s Space out a roadmap for developing the infrastructure necessary to support this Assets vision. It includes all known potential New Mexico spaceport customers, 3.1 Southwest Regional Spaceport including the X Prize Foundation as operator of the annual X Prize Cup and 3.1.1 Background Personal Spaceflight Exposition. It is a The Southwest Regional Spaceport (SRS) forward-looking document in that it also is under development by the State of considers, to the extent practical, vehicle New Mexico. New Mexico’s mission is for types that have not been designed but its spaceport to become the first and that are beginning to emerge as foremost full service commercial practical possibilities.

Southwest Regional Spaceport 15-41 Business Plan 3.1.2 Project Description as, to recover vehicles by horizontal The SRS will be the facility from which landing, vertical powered landing, or to launch and recover space launch parachute landing. The SRS will include a vehicles of the 21st Century. It is control facility with offices, maintenance expected that the facility in some ways facilities, vehicle assembly and payload will operate in the same manner as an integration facilities, a system of roads airport. Multiple operators will use and and utilities, and possibly a cryogenic pay for just the services they require fuel plant. from a range of offerings provided by the spaceport and by third party The SRS will be located in southern suppliers. Sierra County in south central New Mexico. The facilities will be located near Although the spaceport is planned to an abandoned railroad maintenance accommodate certain expendable station called Upham. vehicles, the most important class of vehicles that will operate from the SRS is The SRS will include 18,840 acres of likely to be those that are fully reusable. land, of which 17,280 acres is New These will be different from the current Mexico Trust Land administered by the generation of expendable launch New Mexico State Land Office (NMSLO), vehicles (ELVs) and from the partially 1,280 acres of BLM administered land, reusable Space Shuttle in that any and 280 acres of private deeded land boosters or spent stages that separate owned by two different landowners. A from the vehicle during launch will land safety buffer zone around the launch under full control either at the SRS or at site and beneath vehicle flight paths will a down range landing site. Expendable enclose up to an additional 13,000 acres vehicles that fly from the New Mexico of BLM-administered land. spaceport will be operated in a manner such that the vehicles or their spent Grazing and hunting are the primary components will land in predictable, safe uses of this land at the present. Of the locations either inside or outside the 18,840-acre area of the SRS, only a small spaceport boundaries. fraction will be affected by construction and operation. All facilities will be 3.1.3 Description of End-State located within 7 sections (4,480 acres) of Spaceport Facilities land, but only a fraction even of that area will actually be transformed by The spaceport will be developed in construction. An Environmental Impact phases to accommodate development of Statement (EIS) is in preparation that new requirements of the space launch addresses impacts from SRS industry. The end-state of the spaceport construction, facilities, and operations. will be a full-service space launch and recovery installation that provides all 3.2 Aerospace Infrastructure required goods and services for the full range of space launch activities. It will The Southwest Regional Spaceport will include facilities to support suborbital act as a catalyst for, but should not be and orbital launches of vertical launch mischaracterized as, the new commercial and horizontal launch vehicles, as well space industry in New Mexico. Even the first new space event, which was not

Southwest Regional Spaceport 16-41 Business Plan even held at the SRS but instead at the As the commercial space industry Las Cruces International Airport, expands, individuals will be employed by highlighted the state’s history and private business, research laboratories, aerospace assets. and universities throughout the state. Even a cursory examination of some of New Mexico’s aerospace and aviation our current aerospace endeavors (Table industry is ranked 36th in the U.S. by 3: Aerospace Manufacturing: New employment with 8000 jobs. In New Mexico Vendors) makes clear that this is Mexico air transportation has been a state opportunity, not a southern New negatively affected by the relocation of Mexico phenomenon. many Mesa Airlines jobs from Farmington to Phoenix. The job market for aerospace and nuclear engineers is expected to slow because of cuts in Defense Department and Federal government expenditures.

The growth of the new commercial space industry can build upon the state’s strengths and revitalize the aerospace industry in NM, which even two years ago was considered to be at risk. In doing so, jobs will be created across a broad spectrum of the state’s workforce.

The design and manufacture of the technologically sophisticated products of the aerospace industry require the input and skills of various workers. Skilled production, professional specialty, and technician jobs make up the bulk of employment. A significant number of managerial and administrative support occupations also are employed, stemming from the need to manage the design process and factory operations, coordinate the hundreds of thousands of parts that are assembled into an aircraft, and ensure compliance with Federal record keeping regulations. The aerospace industry has a larger proportion of workers with education beyond high school than the average for all industries.

Southwest Regional Spaceport 17-41 Business Plan

Table 3 - Aerospace Manufacturing: New Mexico Vendors

Vendor Address City Zip Phone Website / E-Mail Aeroparts Manufacturing 431 Rio Rancho Blvd. 891- Rio Rancho 87124 & Repair Inc. NE 6600 661- ARES Corporation 555 Oppenheimer Dr Los Alamos 87544 6390 6200 Uptown 872- Boeing Company Albuquerque 87110 Boulevard Northeast 0282 Devore Aviation 345- www.devoreaviation.com 6104 Jefferson N.E Albuquerque 87109 Corporation of America 8713 2503 Clark Carr Loop 245- Eclipse Aviation Albuquerque 87106 www.eclipseaviation.com SE 7555 765- GE Aircraft Engine 336 Woodward Rd. SE Albuquerque 87102 9200 445- General Atomics 2237 S Trinity Ave B Los Alamos 87544 3730 General Technology 345- 1450 Mission Ave NE Albuquerque 87107 www.gt-corp.com Corporation 5591 455- Honeywell WSMR WSMR 88002 4690 87109 828- Honeywell Inc. 9201 San Mateo NE Albuquerque www.honeywell.com 5000 LightPath Technologies 3819 Osuna NE 342- Albuquerque 87109 www.lightpath.com Inc. 1100 Lockheed Engineering & 524- NASA Road - AFCSF Las Cruces 88012 Sciences Co 5011 Lockheed Engineering & NASA Road, N E of 524- Las Cruces 88005 Sciences Co WSTF Las Cruces 5011 Lockheed Martin 679- P O Drawer H, WSMR WSMR 88002 Corporation 5128 667- Lockheed Martin NV Tech 182 East Gate Drive Los Alamos 87544 4867 761- Optomec Inc. 3911 Singer Blvd. NE Albuquerque 87109 www.optomec.com 8250 Raytheon Technical 523- 301 S Church Las Cruces 88001 Services Co 3965 2511 Broadbent Pkwy 345- Rocketdyne Albuquerque 87107 www.boeing.com NE #C 2660 341- Sandia Aerospace Corp. 5445 Edith Blvd. NE Albuquerque 87107 2930 White Sands Research 434- 1300 La Velle Rd Alamogordo 88310 Center 1725 Source: Bradley & Saunders, 2001

Southwest Regional Spaceport 18-41 Business Plan Starchaser Industries, the first of the for ways to better use current new commercial space ventures to have technology to cut the cost of operations in NM, can be added to the surveillance and communications. list. And they are just the first of potentially many. From a state perspective, the utilization and expansion of the aerospace industry is paramount to the economic 4.0 Situational Analysis development of the state’s economy. Of particular importance is that the 4.1 Political, Economic, Social, aerospace industry in New Mexico is and Technological Environment geographically spread throughout the state. Any increase in activity benefits all parts of the state. Besides the federal 4.1.1 Political Forces initiatives, a private commercialization From a political point of view, the of space industry is developing. The X- establishment and investment in a Prize Competition will take place spaceport cannot come at a better time. annually in New Mexico for at least the In 1982, the Regan Administration began next five years. The companies involved to encourage the commercialization and are the builders of the new private space privatization of space transportation. In industry. The private commercialization that year the National Space Policy was of space and federal initiatives provide a adopted which anticipated private sector golden opportunity for economic involvement in the development of development in the state. launch vehicles. In 1983 the National Security Council issued a comprehensive 4.1.2 Economic Forces policy for Evolving Launch Vehicle (ELV) The annual aerospace related payroll in commercialization. The Commercial southern New Mexico exceeds $300 Space Launch Act was passed in 1984 to million with work being done by White encourage entrepreneurial activity in Sands Missile Range, NASA White Sands space. The act was later amended to Test Facility, General Dynamics cover limited liability to launchers to Corporation, and New Mexico State encourage research and development. University’s Physical Science Laboratory. Additional aerospace activity takes place The present Bush administration has at Holloman AFB, Kirtland AFB and the announced that the United States is New Mexico Institute of Mining and embracing a new vision for space Technology. exploration. This new vision includes private industry in the development of While the immediate economic impact of the next generation of space vehicles. the operation of the spaceport will be The space shuttle program has been shut particularly felt within Sierra County and down due to high costs and continuing Doña Ana County, the Southwest technical problems. A more cost Regional Spaceport will catalyze the effective system must be developed to commercial aerospace and ancillary shuttle astronauts into space. The industries throughout all of New Mexico. military must also cut cost and become Forward and backward linkages already more efficient. The Pentagon is looking exist within the state economy. The

Southwest Regional Spaceport 19-41 Business Plan federal government will be spending during the Apollo-era and has millions of dollars to revamp its space languished since. This endangers the exploration and military programs. nation’s ability to go back to space, both Private companies are also spending militarily and commercially, and national millions of dollars to develop a space defense. It has become a national crisis. tourism industry and to partner with the The situation is worse in New Mexico. government sector. According the National Report Card on High Education in 2004, NM are ill The windfall of tax revenues received prepared for college education and, because of the high prices of natural gas therefore, challenged to participate in let and oil provides a means for the alone be a foundation for the investment in the initial infrastructure commercial space industry. needed to take advantage of the opportunities presented. While the spaceport by itself cannot correct all of these problems, it can be a 4.1.3 Social Forces key to turning it around. Current Space exploration and utilization has programs, such as NM MESA, can be captivated the imagination of the enhanced and new programs launched population since the Apollo missions. surround the burgeoning commercial Many are disappointed and frustrated space industry in New Mexico. It will be with the continuing problems a wonderful gift to the state’s children, experienced by the space shuttle who ultimately will be needed as part program. The interest in space is trained and educated workforce evidenced by the fact that private necessary to sustain the industry. citizens have finally had the opportunity to experience space. While only those 4.1.4 Technological Forces with who are really rich have been able Technological forces represent the to do this, the general populace still has greatest opportunities and challenges to the idea that they too may be able to the commercial space industry and, reach space. The development of therefore, the Southwest Regional private, commercial space related Spaceport. If through improved science companies provides the only avenue for and engineering, the entrepreneurs of these dreams to be realized. It is in the commercial space are able to reduce to realm of possibility that the costs could cost per pound of payload and/or the be lowered to allow almost anyone the cost per passenger, commercial space chance for space travel. will become more a reality and less the dreams of a few. While early evidence Perhaps the most significant social suggests the entrepreneurs will prevail, factor associated with the commercial as they usually do, there remain many space industry is its educational value. questions that must be considered. As For many, the educational benefits of they relate to the spaceport, New Mexico the spaceport are second, and only by a must weigh just how soon the little, to its potential economic return. technology will mature and, therefore, Interest among students in science, how long in advance it must make an technology, engineering, and investment in advance of economic mathematics (STEM) was at its highest development.

Southwest Regional Spaceport 20-41 Business Plan competing not just against other The pace of technological evolution is spaceports but, potentially, major further complicated by competing airports as well. technologies. Recalling history, communities, states, and even the Perhaps the most troublesome and, federal government had to bet on the therefore, most important technological competing technologies of trolleys, force New Mexico faces in developing canals, and railroads. Trolleys and canals and managing the Southwest Regional are now interesting museum pieces but Spaceport is safety. A fatal accident in are hardly the engines of economic commercial aviation barely attracts development. Or, more recently, the attention beyond the evening news and world witnessed the debate between causes only a minor hiccup in air travel, Beta and VHS, and, more recently still, if having any effect at all. A fatal the question of tape versus DVD. VHS accident in a NASA mission, for example won, of course, and DVD is the fastest the Shuttle, grounded the fleet for evolving technology in history. New nearly two years and caused a national Mexico will have to bet on not just the debate about the merits of manned speed of technological change but also spaceflight. An accident, which is upon one or more of several competing certainly possible in the emerging technologies. Investing narrowly to commercial space market, could be fatal accommodate a single technology to the industry if not to particular minimizes infrastructure investment but individuals. increases the risk of technical obsolescence. Investing to accommodate Taken as a whole, external environmental many currently competing technologies factors indicate a viable commercial will cost more in the short term but space market and a unique opportunity perhaps less in the long term as it for New Mexico to shape and, therefore, reduces the risk of technological benefit from its development. Political, obsolescence. economic, social, and technological forces are coagulating into a critical Timing and competitive technologies are mass for success in commercial space. exacerbated by infrastructure But amongst these factors, the vagaries considerations. Once again, New Mexico of technology are the greatest; not so need not guess; at least to some degree, great as to be dissuasive about investing history provides some lessons. In the in the Southwest Regional Spaceport as rush to provide high speed, long-haul a whole, but instead suggesting the need transport of people by rail, some states for more intensive analysis of the bet on maglev trains requiring dedicated investment as a business prospect. Like and expensive rights of way. Others bet all business prospects, this requires a on and invested in high speed trains that thorough understanding of the market. could use existing and shared rights of way. At least for the time being, the latter option seems to be prevailing; at 4.2 Competitive Environment least in some markets. If that were be For many, entrepreneurial commercial the case for commercial space, the space, regardless of segment, is no Southwest Regional Spaceport would be longer a question of if, but when. New

Southwest Regional Spaceport 21-41 Business Plan Mexico is not alone in aspiring to be at The number of operating and proposed the forefront of and, thereafter, spaceports indicates that the launch establishing itself as a foundation of this market is highly competitive. As space emerging industry. The Southwest development in the United States shifts Regional Spaceport will compete with towards the involvement of the private existing and proposed spaceports for the sector and new technologies are business of the above listed companies. developed, the market may get even The facilities and services offered will more competitive. partially and probably overwhelmingly determine the success of that International competition is, perhaps competition, at least in the short run. In even more significant than already the long run, though, New Mexico’s licensed, let along proposed, domestic ability to attract and retain users of, and spaceports. New Mexico’s domestic tenants in, the Southwest Regional competitors survive by political largesse, Spaceport will not rest in technical a legacy that might be more hindrance capabilities alone, but instead in the than helpful and have operational State’s ability to support their business limitations. Foreign competitors, models. Otherwise, as has too often though, may not be so burdened. Those been the case over the years and in in search of efficiency and effectiveness others industries, technology will be launch from, and use, Russian born in New Mexico, deployed in technology. Those looking to launch California, and profited from in Virginia. over water but seeking to avoid excessive regulatory burdens launch from various The Federal Aviation Administration archipelagos. Others, looking to benefit (FAA) has licensed five commercial from launching over water while launch facilities: California Spaceport at simultaneously enjoying the best, but Vandenberg Air Force Base; Spaceport avoiding the worst of U.S. regulatory Florida at Cape Canaveral Air Force burdens, are launching from various Station, the Virginia Space Flight Center island groups in the Trust Territories of at Wallops Island; Kodiak Launch the Pacific, such as the Northern Complex on Kodiak Island Alaska; and Marianas Island and the Federated States the Civilian Aerospace Test Center in of Micronesia. Mojave, CA. Other states have considered developing commercial spaceports, including Idaho, Louisiana, Mississippi, 4.3 Strengths, Weaknesses, Montana, Nevada, North Carolina, and Opportunities, and Threats Utah. There are numerous other Given the number of spaceports in spaceports in development in the United existence and in the planning stages, States and internationally, including what advantages would the Southwest Oklahoma, Texas, Russia, and Australia. Regional Spaceport have over its While the Southwest Regional Spaceport competitors? A Strengths-Weakness- will not compete directly with the Opportunities-Threats (SWOT) analysis federal spaceports, their existence must provides insights into the prospects be acknowledged faced by the Southwest Regional

Spaceport. The goal of the organization

Southwest Regional Spaceport 22-41 Business Plan is to build on strengths, eliminate or the spaceport. These include incentives minimize the effect of weaknesses, take for expanding local business and advantage of opportunities and to guard attracting new firms–such as the Job against threats. Training Incentive Program, Aerospace Research and Development Deduction, 4.3.1 Strengths Local Economic Development Act, and The Southwest Regional Spaceport has Investment Tax Credit. Included in the numerous strengths. The site has traditional industries of the state are favorable elevation, climactic, and research and development and latitude characteristics. It is located in a electronics manufacturing. Expanding desert region with sparse population industries include aerospace which is particularly useful for missile manufacturing, advanced business testing, space tourism, and sounding services, electronics-component rocket work where payload recovery is manufacturing, and telecommunications. required. While there is very little Networking alliances exist and infrastructure, facilities can be built to government initiatives are in place to satisfies the needs of the companies that promote trade within and outside the will use the port. region to foster an entrepreneurial culture (New Mexico First, 2004). The The spaceport can be served by a number workforce has a reputation for hard of high technology governmental and work. associated commercial entities with ties to the aerospace and related industries. Further, the universities and community New Mexico has a long history of colleges in the state are heavily involved helping develop space exploration and in workforce development and in testing. The spaceport will be located providing incubator services (New near the White Sands Missile Range Mexico First, 2000). In addition, the which also has a history of rocket universities have strong programs in the development and testing. Because of sciences, engineering, business proximity to the White Sands Missile administration, and economics. New Range, the air space is restricted. No Mexico State University recently added a commercial flights are allowed over the space engineering degree to its offerings. area. The effort has even spread to the middle and high school levels. Students at White Technology clusters have formed in the Sands Middle School are able to enroll state to foster the health of the space into a magnet program dedicated to sector, and contribute to general aerospace studies. The state attracts a economic development. Presently there large tourist complement, which is is a good political climate where public favorable to space tourism facilities. The and private individuals and institutions quality of life in the state–featuring such are working together to take advantage items as scenic sites, recreation of high technology opportunities. possibilities, cultural opportunities, parks and forests, historic sites, fairs, and other The state of New Mexico possesses diversions, and lack of congestion–is very numerous economic, political, and useful in attracting employees into New commercial advantages that pertain to Mexico. Governmental and business

Southwest Regional Spaceport 23-41 Business Plan personnel in the state have manifested a long run, if all of the sub sectors, significant commitment to the growth of including space tourism and space the industry. services, are taken into account and develop as anticipated. Demand for the 4.3.2 Weaknesses services is worldwide and can be The Southwest Regional Spaceport has expected to expand in the future. Space some disadvantages. The main tourism, in particular, has a potentially disadvantage is that the spaceport exists bright future. There is political, only on paper. Not even minimal economic, and popular support for this infrastructure is in place. The FAA license area of activity. Low earth orbit provides application has not been submitted. In opportunities for space life science addition, New Mexico has a history of research, to study the geology, climate, “almost” starting large projects. and biosphere of earth, and to assemble large vehicles for interplanetary Being in the formative stage, the exploration. Further, environmental Southwest Regional Spaceport is not at support is evident, as space offers the level of maturity and development as significant potential advantage, in fields are some competitors. It may be some such as the generation and transmission time before it is in a position to take of solar energy (Collins and Taniguchi, advantage of learning curves and 1997). develop sufficient size to enjoy the economies of scale possessed by some New Mexico will be the home of the X- older competitors. In addition, some Prize Cup and will sponsor space related rivals have already established working events each year for the foreseeable relationships with their customers which future. In addition the federal may render it difficult to convince these government has embarked on a program customers to switch spaceports. The to include private industry in the logistical infrastructure—the network of development of the next generation of transportation ways and carriers—has yet space vehicles. to be further developed, in order to be commensurate with some other Of particular importance is the federal spaceports. Further, the facility is not initiative to include the private market in located nearby large population centers the development of the next stage of and is in need of further logistics space exploration and the military infrastructure, both of which could be establishment interest in cutting the cost deterrents to space tourism patronage. of surveillance and communications. Some sectors in the state have yet to develop an expanded entrepreneurial 4.3.4 Threats culture that would be useful in Paramount among the threats is the promoting the degree of distribution and substantial competition from rivals supplier support which the industry (some with significant financial backing prefers and even requires. and managerial excellence) within the United States and abroad, posing an 4.3.3 Opportunities obstacle to effective penetration of the Numerous indicators suggest that space market and the attraction of needed will be a growth industry, at least in the capital. Economic, regulatory, and

Southwest Regional Spaceport 24-41 Business Plan physical risk raise the possibility of both 5.0 Planning Framework financial cost and physical failure associated with space efforts. There is 5.1 Mission some degree of saturation in the telecommunications sector, and this is The Southwest Regional Spaceport will predicted to continue into the future. be the premiere American spaceport of This picture is coupled with a decline in the second space age. market share for United States firms. Further, if the sub-orbital tourism markets do not develop as predicted, the 5.2 Vision industry may not experience the desired The Southwest Regional Spaceport will degree of growth. be the vehicle to open the space frontier to all citizens, will bring new companies Another threat is the possibility of and jobs to New Mexico, increase restrictive legislation which could be tourism statewide and help brand New imposed by federal and state Mexico as the place to experience the governmental bodies in an attempt to future. more fully regulate this sector. This is particularly true when trying to compete 5.3 Goals and Objectives with launch facilities in foreign Objective 1. To have a fully operational countries. Finally, limitations in public spaceport facility by 2010. and private sector financing can impose an obstacle to future growth. Spatial Goal 1.1 Obtain FAA licensing by October projects must compete with earth-bound 2006 organizations for funds. Goal 1.2 Complete infrastructure construction phases as outlined Always a threat is the perception held by in infrastructure plan some members of the public that space Goal 1.3 Obtain funding in phases as business is not a solid reality, that it is outlined in the financial plan based upon the dreams of visionaries but Goal 1.4 Complete operational has limited practical value. The industry implementation phases as is in need of a communications program outlined in the operations plan. that informs and educates the public Goal 1.5 Complete marketing about the potential benefits which this implementation phases as field offers. outlined in the marketing plan.

In sum, the overall picture for the Objective 2. To enhance the economic spaceport is promising, but not without development, tourism and educational risk. While there are weaknesses and opportunities in the state. threats in existence, the strengths and opportunities are abundant and indicate Goal 2.1 To develop backward linkages the potential for success. for companies to serve the needs of the launch companies operating at the spaceport Goal 2.2 Have numerous, regularly planned, weekly launches by

Southwest Regional Spaceport 25-41 Business Plan 2010 to serve as a basis for away patronage. The spaceport, if it can tourism carve out particular portions of the Goal 2.3 To develop hotel(s), restaurants, market, will be in a relatively secure and other amenities on site to be position. used by tourists Goal 2.4 To have educational It is apparent that some segments are connections between the attractive for the near future and might spaceport and grade schools, be approached initially. An example is high schools and colleges space tourism. Others lie far in the Goal 2.5 To develop a museum and horizon and may not be good targets for educational tours of the some time to come. An example is the companies and facilities on site space elevator market.

Objective 3. To provide an environment Other near term markets include for the care, development and success of reusable launch vehicles, space the businesses operating at the transportation systems, fast package spaceport express, space tourism, space business and theme parks, space manufacturing, Goal 3.1 To provide a set of amenities on microgravity research and development, site that cater to the businesses remote sensing, communication, space using the spaceport solar power, entertainment, space rescue Goal 3.2 To develop connections services, space mining, waste disposal between the companies on site space servicing and transfer, space and the research, development, utilities, and orbital debris removal testing and evaluation capabilities already existing in Orbital markets, while further out on the the state planning horizon, are also viable. Large numbers of launches are expected for ISS missions, military remote sensing, 6.0 Tactical Considerations television and radio, civilian remote sensing, and data communications. 6.1 Marketing Strategies are needed in a number of 6.1.2 Services areas. These include segmentation, A variety of ground facilities and services, and promotion. This section activities may be required to support deals with each of these, in turn. profitable formation of general public space travel and tourism enterprises (O’Neil, 1998). These include firms that 6.1.1 Segmentation are formed to exploit demand even By segmenting the market, the spaceport before actual in-space trips are available will be able to create a specific to the public. The facilities could span a marketing mix for each subgroup of wide range and include theme parks, trip potential customers that the training facilities, medical facilities, organization intends to satisfy. This can space camps, amateur rocketry facilities, engender considerable customer loyalty space-related merchandise, hotels with and make it difficult for rivals to win spas and golf courses, restaurants and

Southwest Regional Spaceport 26-41 Business Plan other public quasi-entertainment and employment in these and other more supportive facilities that could develop technology-oriented industries will allow around the sites. The operations could the state to enhance its economic offer attractions such as virtual reality position relative to import activity from experiences, where on the surface a less developed economies that rely upon person could experience in some degree labor intensive industry and low wages. the characteristics of human spaceflight–whetting the appetite for 6.1.3 Promotion the “real thing.” The success of such Promotion will be a vital tool for businesses could be crucial in raising communicating with outside parties, public awareness and capital for actual particularly customers. The in space travel and tourism to follow. communications are employed, in this case, to convince customers that they The ground facilities and activities could should make use of spaceport facilities be set up prior to the time when actual and services. These customers include in-space excursions are offered to the launch operators and developers, public. These opportunities could be subcontractors, aerospace satellite and useful in preparing the public for space vehicle manufacturers and suppliers, travel and in providing revenues to the material and fuel suppliers governmental spaceport. In turn, these commercial units, space tourism operators, space enterprises could assist in increasing tourists, payload support and operations public awareness and capital investment ancillary service enterprises, research for in-space travel to follow. And they units, technology centers, institutions of could continue to attract patronage higher education, providers of capital, once in-space travel is in effect. and others. Promotion is necessary, in most cases, to attract these parties to Passenger preparation is a necessary the spaceport, either as providers of service for space tourism. This would goods and services or as include developing a familiarity with the buyer/consumers. systems on board, to assure health and safety. Rather than being a burden, it Further, promotion is needed to develop may well prove that preparation favorable attitudes in the ranks of New activities are a valued part of the overall Mexico citizens, influence wielders, and space travel experience. Broad governmental officials, in order to experience in the preparation process ensure the provision of adequate itself could become a revenue generating resources for spaceport development and element of the business. operation. Communications must convince these parties that the spaceport To be successful, space tourism and will bring significant economic commercial space generally requires a advantages to the state. Relevant and up variety of ancillary goods and services. to date space related information should These include construction, interior be provided to policy makers, the media, design, hotel management, catering, and the general public. This should fashion, entertainment and sports, which emphasize the impact of space enterprise currently are cut off from this source of on the economy of New Mexico. A economic growth. Increases in contact plan for outreach to state

Southwest Regional Spaceport 27-41 Business Plan policymakers and their staffers, including operations plan, develop museum their visitation to the spaceport for and educational tours of on site orientations, may be needed. Texas has companies and facilities. embarked upon a promotion program 3. Promotion which embodies most of these a. Develop a promotion strategy influences. In the same vein, the state of to develop support of spaceport Florida is actively engaged in developing from state citizens and a program to achieve the same purposes. legislature. b. Develop a promotion strategy A variety of media and activities can be for outreach activities. used to promote the spaceport. They c. Develop a web site and internal include advertisements, participation in and external newsletters. trade shows, development of a website d. Develop a strategy to promote and newsletter, attendance at space the spaceport through the use related conferences and meetings, of all types of media. publicity with the regular print media and television, and educational programs. 6.2 Legal The legal environment creates a variety 6.1.4 Action Items: of obstacles to development of the 1. Segmentation private commercial space industry. a. Develop a list of targeted near- These obstacles fall primarily into two term and long-term markets. categories: regulatory issues and liability b. Identify the companies most concerns. With respect to liability likely to be involved in the concerns, given the infrequency of space targeted markets. launches, there is a very limited c. Identify those companies that statistical base for calculating expected would become the backward risk, and as a result, insurance availability linkages for direct customers of is limited and premium expenses for the spaceport. private space launch activities are high. d. Develop a plan to contact and foster relationships with companies listed above. 6.2.1 Regulatory and Licensing 2. Services Issues a. Develop a list of targeted service 1. FAA Licensing of Launch Vehicles and providers for the spaceport. Spaceports b. Identify those companies most

likely to be involved in the Although a variety of governmental ancillary activities of the agencies have been involved in the spaceport. regulation and licensing of commercial c. In conjunction with the space launches in the past, today this operations plan, foster function is largely within the purview of connections between the the Office of the Associate Administrator spaceport and the educational for Commercial Space Transportation institutions in the state. which is a part of the Federal Aviation d. In conjunction with the

Southwest Regional Spaceport 28-41 Business Plan Administration (FAA-AST). Primary streamline licensing and regulatory authority for licensing and regulating requirements must be managed at the commercial space operations rests with federal level. the FAA/AST. The FAA/AST issues licenses for both spaceports and individual 2. Federal Technology Transfer launches. In 2000, the FAA established Restrictions and Export Controls operational and licensing requirements for launches and reentry of RLVs. One of For the purpose of protecting space- the most significant tasks undertaken by oriented national security interests, the the FAA-AST during the licensing process federal government imposes complex is assessment of the third party risk. technology transfer restrictions and Given the mandate from Congress to export controls (Waldop). The U.S. has ensure that public health and safety are some of the strictest unilateral export not jeopardized by space launch controls in the world. The Export activities, it is not surprising that the Administration Act (EAA)(50 U.S.C. 2410) licensing process is complex and time and the Arms Export Control Act consuming. While the FAA/AST has (AECA)(22 U.S.C. 2778) are the main taken measures to assist developers with statutes establishing the U.S. export understanding the licensing control regime. requirements, some industry experts assert that the complex regulatory and These laws all have an impact on the licensing requirements place the U.S. commercial space industry, much of it launch vehicle developers at a negative. Commercial space companies competitive disadvantage to those in may seek to export technology in order other countries. The Commercial Space to acquire necessary components or to Launch Amendments Act of 2004 sell their own components or systems to (CSLAA) attempts to address some of SLV developers abroad. SLV operators these concerns, particularly with respect need to transfer technical details about to licensing vehicles carrying human their vehicles to insurance companies, beings for compensation or hire. Until many of which are outside the U.S., to the FAA/AST adopts implementing obtain launch insurance quotes. regulations, it is difficult to assess the Commercial space ventures have noted ultimate impact of the CSLAA. Some of difficulties and delays in obtaining the CSLAA provisions (such as those necessary licenses to even allied authorizing imposition of medical and countries. training requirements for space travel customers) may actually increase the Undoubtedly, the complex regulatory regulatory burden imposed on the scheme for the export of technology has developing space travel industry. a deleterious effect on the commercial However, Draft Guidelines issued by the space industry. The federal government, FAA in February 2005, suggest that the through its regulatory agencies, additional regulatory requirements will continues to seek an appropriate balance not be onerous and may, in fact, benefit between protecting national security and the industry by clarifying its promoting commercial space activities. responsibilities to passengers and crews Whether any significant amelioration of of SLV’s. Any further efforts to

Southwest Regional Spaceport 29-41 Business Plan the regulatory burden can be achieved on SLV’s will be apprised of those risks. remains to be seen. Similarly, it may be advisable to amend other statutes to exclude SLV’s from 3. Relevant New Mexico Statutes treatment as aircraft and the SRS from treatment as an airport. For example, While most of the regulatory concerns of New Mexico statutes currently preclude note arise at the federal level, there are an airport facility that receives funding several state laws that may be of under the Aviation Act (64-1-11 to 64- importance to the spaceport and its 1-17 NMSA 1978) from charging landing customers. The State of New Mexico has fees (with some exceptions). If the SRS already taken a variety of steps to intends to charge launch fees, and if it encourage and attract space related will receive funds from the state aviation industry to the State, including making fund, then the statute should be some regulatory concessions. For amended to allow such fees. Further example, commercial space launch clarification may also be needed activities and spaceport operations have regarding the applicability of the statute been exempted from the state gross requiring a joint airport zoning board receipts tax (NMSA § 7-9-54.2). In 2005, (64-2-1 NMSA 1978), the Aircraft a statue creating a Spaceport Authority Registration Act (64-4-1 through 64-4- was enacted. The new authority has 15 NMSA 1978). been given authority to issue revenue bonds to finance the development of the spaceport. 6.2.2 Liability Issues Liability concerns play a prominent role New Mexico statutes relating to aviation in development of the spaceport. should be reviewed. As currently written, Spaceport and launch vehicle operations it is likely that an SLV will be treated as will give rise to a wide variety of liability an aircraft under the New Mexico exposures ranging from mundane Statutes, and will be subject to the workers’ compensation claims to regulations and restrictions imposed on environmental contamination. The aircrafts (NMSA § 64-1-1 and NMSA § greatest and least predictable potential 64-1-21. Under New Mexico statute, the exposure arises from the possibility of a SLV’s are likely to be considered common catastrophic launch vehicle accident. carriers (NMSA § 64-1-6). The law imposes a higher duty of care on The potential for liability exposures common carriers, and hence, such related to spaceport ownership and entities have potentially higher liability operations has ramifications in two exposure than other business activities. related but distinct contexts. One This heightened standard of care will ramification is the potential hazard to only exacerbate liability concerns in the the people of New Mexico and the SLV industry and is probably potential cost to the state. With respect inappropriate given that SLV’s will, to this issue, it is important to remember particularly in the early developmental that many of the spaceport activities years, be subject to risks far beyond that will create liability exposure will be those typically created by other carriers similar in nature to those encountered at and the passengers and owners of cargo any other state operated facility (such as

Southwest Regional Spaceport 30-41 Business Plan a state park or a school). Among the controlled and insurance costs for SLV typical liability risks would be such operators can be reduced. things as the risk of injuries to employees (worker’s compensation), A spaceport that is owned and operated typical premises liability concerns (so by the State of New Mexico will carry called slip and fall cases), etc. certain liability risks for the State, as does any other State operated facility. The second ramification is the impact The extent of that liability, however, is that liability exposure has upon the subject to some existing limitations and commercial space ventures that may can also be controlled in some respects. become spaceport customers. Like many Under the CSLA’s liability risk-sharing other business enterprises, the regime, non-federal launch sites and commercial space ventures and their reentry site operators (such as New insurance companies are concerned Mexico would be as operator of the SRS) about the potential for enormous are covered as additional insureds under liability verdicts. A state that can give the launch licensee’s third party liability some assurance that liability exposures insurance if their site is used to support will be reasonable and predictable will the licensed launch or reentry that have a substantial competitive results in the third party claim. As a advantage in attracting customers to its result, the SRS not only would have the spaceport. Conversely, to the extent that benefit of the insurance obtained by the the space launch vehicle developers and licensee but would also be eligible for operators (SLVO’s) who are the primary U.S. Government indemnification under customer base for the spaceport and the CSLA if third party claims arising their insurance companies perceive New from the launch activity exceeded the Mexico to be a haven for out-of-control FAA required insurance amount. The flip liability awards, they are less likely to side is that the SRS would also be find our spaceport to be an attractive required to participate in the reciprocal location. waiver of claims agreements under which it will assume its own risk of The nature and types risks associated property damage or loss and agree to be with the space operations depend, in responsible for its employee claims. significant part, on the types of launches and the related activities that are The FAA has determined that the CSLA undertaken at the facility. The bottom insurance and indemnification provisions line is that not all space launches are extend only to site operations that are alike and, consistent with typical a risk related to licensed launch activities. management analysis, the State will Hence, the State would not enjoy the need to determine the parameters of same protections when providing acceptable launch types, vehicle types associated launch site services which are and fuels types that will be permitted for not part of a licensed launch or reentry use at the NM Spaceport. By restricting (such as ground tests, static the types of space launches to those that demonstrations etc.) The SRS will most have been determined to meet likely want to offer launch services that acceptable risk levels, the liability risks are not subject to the CSLA protections. associated with the Spaceport can be

Southwest Regional Spaceport 31-41 Business Plan If it chooses to do so, the State must proof of fault (negligence). If the state’s choose one of the following options for role is primarily that of a landlord, dealing with third party claims: providing only the use of the physical (1) accept the risk under the state’s space and its infrastructure, with no on- existing risk management program and site state employees, the liability bet the state’s assets to cover liability exposures should be fairly narrow in exposure scope. Even this minimal level of (2) buy insurance (but without the involvement does have some risks - benefit of federal guidance on limits) primarily related to inadequate design or and bet state assets in the event the maintenance of the infrastructure. amount is inadequate (3) require cross-waivers and liability Basically, it is safe to say that the State’s coverage from customers (creating a liability exposure will increase in direct disincentive for customers to locate at proportion to amount of control and the SRS) involvement it maintains in SRS (4) forego the non-licensed activity operations and the number of ancillary (again, potentially creating a disincentive activities that it chooses to allow at the for customers and potentially decreasing SRS site. Should the State choose to revenue opportunities)(FAA, DOT 2002). take a more active role in the Spaceport operations, for example, by directly The Spaceport Florida Authority (SFA), a providing ancillary services, the State’s state government organization licensed liability exposure will be greater than a by the FAA as a launch site operator has model where the State takes a relatively taken issue with the FAA’s decision not passive role. to establish insurance requirements for such operators. The SFA contends that Similarly, liability exposure will be the indemnification available under the increased by activities that bring third CSLA liability risk sharing regime should parties in close proximity to the launch be available to licensed launch site site. To the extent that the State utilizes operators as well as licensed launch the SRS site as a tourist and education operators because both types of destination, thereby attracting large licensees conduct hazardous activities numbers of third parties to the site, for which insurance may not be those activities will increase the risk of reasonably available. third party damages (and therefore increase the FAA calculated MPL and, Aside from the issue of FAA licensed vs. hence, the insurance requirements for non-licensed activities, a good deal of the launch vehicle operators). the liability exposure for the State will depend upon the role that the State The State’s liability arising from the chooses to play in the operation of the spaceport will also be determined by the Spaceport and the scope of activities State’s Tort Claims Act (TCA), as it is with that the State allows to be conducted claims arising from any other state there. Ownership of the land and activity (NMSA § 41-4-4). At present, allowing spaceport operations, standing the State has waived immunity for alone, is unlikely to result in liability liability for damages caused by the since most liability claims will require negligence of public employees in

Southwest Regional Spaceport 32-41 Business Plan operating and maintaining any building, of jurisdictional and conflict of laws public park, machinery, equipment or issues that have never before been seen furnishings. (NMSA 41-4-6 1978) This in the courts of this country or abroad. waiver would almost certainly apply with respect to operation and maintenance of While the State lacks the authority to the spaceport. The State has also waived control liability claims for damages that liability for damages caused by the occur outside its geographic boundaries, negligence of public employees in the damages within the state are operation of airports (NMSA 41-4-7 significantly more likely to occur than 1978). The State’s liability, however, is damages outside the state, particularly if subject to multi-tired damage caps SRS limits itself to suborbital launches. which limit the State’s liability for any one occurrence (NMSA 41-4-19). With respect to those damages that could occur within the state boundaries, New Mexico has the authority and 6.2.3 State Opportunities to Create opportunity to enact statutes that define an Attractive Legal Environment and seek to limit the liability exposure The federal government has taken an resulting from launch activities at the active role in attempting to control and SRS. The enactment of such laws would, clarify the liability risks that commercial at a minimum, send a signal to potential SLV operators are most likely to customers that the State is attempting encounter. Traditionally, however, the to provide a friendly legal environment parameters of tort liability have been for such commercial space activities. established by state law. To the extent These laws could also have a positive that space launch activities may give rise impact by influencing insurance to damages within the state, which providers to reduce premiums in continues to be true. As a result, the response the decrease in liability state is in a position to enact new laws, exposure. consistent with federal law, that further delineate the standards for liability and New Mexico could adopt a statute the scope of liability that will be imposed specifically stating that passengers on in the event of claims resulting from space launch vehicles, who have been space launch activities. given appropriate informed consent that conforms to federal regulations, and Damages resulting from space ventures their survivors are precluded from could occur anywhere around the globe obtaining any monetary damages for or even outside the traditional reaches of injuries or death resulting from the earth’s jurisdiction and might involve space launch and related activities, individuals from a variety of nations and except in cases where the space launch states within the U.S. As a result, operated acted with gross negligence or numerous state, federal, foreign or reckless disregard. This high standard of international laws may govern limitation proof would be consistent with the of liability issues in claims against either federal proposal and should further spaceport operators or SVL operators. discourage lawsuits and make recovery Eventually, claims resulting from space unlikely in most instances. launches could give rise to any number

Southwest Regional Spaceport 33-41 Business Plan One of the most interesting, and 2. Work with Federal authorities practical opportunities for New Mexico with respect to licensing and to differentiate itself from other states regulatory procedures. developing spaceports is through the 3. Work with Federal authorities creation of a state funded bond to cover with respect to intellectual the CSLA Tier One financial responsibility property concerns. requirement of SLV operators. A state 4. Work with state authorities and fund of approximately $10 million would legislature to enact new laws, be necessary to pursue this option. The consistent with federal law, that fund would be pledged as a bond to pay further delineate the standards Tier One damages should they occur, in for liability and the scope of satisfaction of the FAA/AST financial liability. responsibility requirements. Spaceport 5. Work with state authorities and customers might be allowed to use the legislature to amend current bond at no cost or low cost. The money statutes concerning the in the fund would be invested and would definitions of aircraft, common continue earning a return for the State carrier, and airport. unless and until claims were asserted. 6. Work with state authorities and legislature to create a ‘bond’ to In determining whether the idea of a cover the SCLA Tier One financial State funded bond is viable, it is responsibility of SLV operators. important to remember that the risk of third party and government damages 6.3 Financial and Investment resulting from launches at the SRS is Provided below is a description of the expected to be extremely low. In overall finance plan and a detailed addition, the MPL calculations performed financial analysis that computes the by the FAA/AST provide a good indicator yearly breakeven revenues for various of the level of risk associated with scenarios for the proposed Southwest individual launches. To limit the risk of Regional Spaceport. claims against the funds (while at the same time limiting the risk imposed on The SRS finance plan is built on an initial New Mexico’s citizens), the State could public ownership structure which will adopt requirements of MPL’s of less than evolve into a public/private ownership a specified dollar amount as the criteria structure over time and incorporates a for permitting launches at the SRS site. staged approach to raising the estimated But no matter what restrictions are $170 million to $230 million needed to imposed, the use of such a fund will construct the spaceport. This finance place the risk of loss squarely on the plan reviews the sources of potential shoulders of the State and its taxpayers, capital available to the SRS, details the rather than upon private insurance SRS infrastructure and operational companies. capital requirements and computes the breakeven revenues necessary for 6.2.4 Action items: meeting the infrastructure and 1. Obtain FAA licensing by October, operational capital requirements. 2006.

Southwest Regional Spaceport 34-41 Business Plan 6.3.1 Potential Sources of Capital successful funding from these sources, As with any large transportation project, however, is questionable. there are three main sources of capital available to fund infrastructure Finally, as with some current airfields, development and early stage operational the New Mexico Spaceport could be costs: outright government grants, debt designed as a dual use facility, meeting and equity capital. the needs of both commerce and government. If possible, without Grants - Probably the most promising jeopardizing the launch integrity of and economically most viable source of private operators, a major concern, a infrastructure and early stage substantial portion of infrastructure and operational funds for the SRS are State operating costs could be borne by the of New Mexico legislative appropriations. federal government. This project is essentially a major economic development project for the Debt - The 2005 legislature passed and state and, hence, it would be appropriate the governor signed HB419, the for substantial state support. To date, “Spaceport Development Act” which the legislature has appropriated nearly gave the Spaceport Authority the power $20 million for the SRS project to issue revenue bonds. These revenue addressing initial setup funding, New bonds are payable only from properly Mexico Office of Space pledged spaceport revenues (e.g. Launch Commercialization (NMOSC) operations fees and/or facility leases) and the and capital outlays. It is anticipated that bondholders may not look to any other the State of New Mexico will provide state fund for the payment of interest substantial early stage infrastructure and principal of the bonds. The development funding along with early authority cannot incur debt as a general stage and possible later stage annual obligation of the state or pledge the full operating subsidies. An important point faith and credit of the state and its to note is that this analysis does not taxing powers to repay the debt. consider the opportunity cost of alternative uses of these state In theory, two other types of bonds appropriated monies or any associated would be available to fund SRS economic benefits and multiplier effects infrastructure development: General from the state appropriated capital Obligation bonds and Private Activity expenditures for the SRS. Bonds (Conduit Debt). Given the risky and uncertain nature of the pace of SRS SRS may receive federal grants from one development and expected future or more of the following sources: revenues, it would not appear prudent National Aeronautics and Space for the State of New Mexico to issue Administration (NASA), Department of General Obligation bonds that pledges Defense (DOD), Federal Aviation the full faith and credit of the state. It Administration (FAA), and Department of may be possible, in later development Transportation (DOT). The FAA also stages of the spaceport, for the issuance grants funds to passenger and cargo of Private Activity Bonds which act as a airports under the Airport Improvement “conduit” between the public and private Program (AIP). The likelihood of sector. These bonds would not be direct

Southwest Regional Spaceport 35-41 Business Plan obligations of the state or the SRS but would be paid off solely from the In general, the amount of expenditure revenues generated from the private allowed for economic development activity project. projects is limited to five percent of the annual general fund expenditures of the New Mexico Local Economic local government. However this Development Act - Additional funding limitation does not apply to a) the value may be possible at the local level, of contributed land or buildings especially for infrastructure leading into pursuant to a project participation the Southwest Regional Spaceport. The agreement, b) revenues generated by the stated purpose of the NMLEDA is: imposition of an infrastructure gross receipts tax, c) the proceeds of a revenue “… to implement the provisions bond to which the infrastructure gross of the 1994 constitutional receipts tax is pledged, or d) donated amendment to Article 9, Section funds. 14 of the constitution of New Mexico to allow public support of An economic development project is the economic development to foster, direct or indirect assistance by a local promote and enhance local government unit to a qualifying economic development efforts business. Economic development while continuing to protect projects can take almost any form. The against the unauthorized use of local government unit can purchase, public money and other public lease, grant, construct or reconstruct resources. Furthermore, the buildings or other infrastructure and purpose of that act is to allow acquire or convey land. The government municipalities and counties to unit can also provide direct loans or loan enter into joint powers guarantees for land, buildings or agreement to plan and support infrastructure. The unit could also regional economic development provide public works improvements projects.” [5-10-2 NMSA 1978] essential to the location or expansion of a qualifying business. The NMLEDA allows municipalities and counties to expend funds on economic In general, a qualifying entity is any development projects. The law also business or individual who is engaged in stipulates how much can be spent, what business except for retail and farming. constitutes an economic development The business or individual must be project and what is a qualifying entity. engaged in the manufacturing, The local government unit must also processing or assembling of agricultural have adopted by ordinance an economic or manufactured products or engaged in development plan or a master plan with the storing, warehousing, distributing or an economic development component. selling products at the wholesale level. A The unit must follow certain procedures commercial enterprise engaged in the when pursuing economic development distribution of products or services projects. Municipalities and counties are commonly known as public utilities also allowed to enter into joint power cannot be a qualifying entity unless it is agreements. a telecommunications enterprise that

Southwest Regional Spaceport 36-41 Business Plan makes most of its sales outside of New the governmental units participating in Mexico or is an Indian nation, tribe or the joint powers agreement. pueblo or a federally chartered tribal corporation. The only other instance that a retail enterprise can be a 6.3.2 Infrastructure and Operational qualifying entity is when it provides a Capital Requirements facility known as a farmer’s market. Initial infrastructure estimates indicate costs of between $170 million and $230 In order to provide funding for an million. It is anticipated that the SRS economic development project the local will be developed in a multi-phased government unit must adopt through “staged” approach with only the very ordinance an economic development necessary and essential facilities and plan or master plan that has an services initially provided with a gradual economic development component. The expansion as the revenue and cash flow law is not very restrictive of what must generation capability expand over time. be in this plan but it suggests a list of It is currently estimated that the initial items that may be in the plan. Items necessary infrastructure costs will be that are suggested include goals and approximately $20 million per year over strategies, qualifying activities and a five year period starting in 2006. This entities, application and verification would include construction of possibly procedures, the identification of revenue two 12,000 foot runways, hangers, fuel sources and what other resources the storage, support structures (Simulation governmental unit may use, and and Mission Control Facilities), necessary safeguards against default, termination launch pads and launch area structures, of aid and if the qualifying entity leaves roads to the facilities, basic utilities and the area. communication capabilities. Initial operational costs are estimated to be Once an application for an economic about $1,250,000 per year. It is development project is accepted, the expected that the eventual overall cost governmental unit and the qualifying of the infrastructure will approach $200 entity, under the NMLEDA, must enter million plus or minus $30 million and into a project participation agreement. yearly operational costs will be This agreement must specify the approximately $2 million. contributions of both parties, the security provided by the qualifying entity Given the staged infrastructure and to the governmental unit, a schedule for operational requirements of the project completion and provisions for spaceport, pro forma financial performance review. All projects must statements for the SRS via a breakeven be approved by ordinance. revenue approach can be estimated. This approach utilizes the estimated staged The final part of the law that is of infrastructure and operational costs to interest is that it allows multiple compute the overall necessary SRS yearly governmental units to combine under a revenues that would be required for the joint powers agreement to develop a state to earn a zero Net Present Value on regional economic development plan. its investment (i.e. breakeven) under Any project must be approved by all of various total infrastructure and real cost

Southwest Regional Spaceport 37-41 Business Plan of capital assumptions. This breakeven $100 million to SRS infrastructure revenue is essentially what would be development over a staged 5 year period needed in yearly revenues to cover starting at the beginning of 2007. It is operating costs, service any debt issued also assumed that Spaceport Authority and provide the state with a return on Revenue Bonds are issued in 2012 based its staged infrastructure investment on a then established, consistent revenue equal to its assumed real cost of capital. and cash flow stream. The breakeven The spreadsheet model breakeven cash flow results in Table 4 are revenue results (for eighteen scenarios) substantial and can best be understood and assumptions are presented in Table by examining one of the scenarios. The 4: SRS Financial Plan Spreadsheet Model scenario described here is the one Breakeven Revenue Results and associated with $200 million in Assumptions. infrastructure cost and 7% real cost of capital. In this scenario, it is assumed In the Table 4 model it is assumed that that the total SRS infrastructure cost will the State of New Mexico contributes be $200 million which will be financed

Table 4 - SRS Financial Plan Spreadsheet Model Breakeven Revenue Results and Assumptions Infrastructure Cost Real Cost of Yearly Breakeven Yearly Breakeven Capital Revenues Needed Revenues Needed Starting in 2006 Starting in 2010 $170,000,000 4% $8,360,258 $10,923,279 7% $9,054,420 $12,666,041 10% $9,785,801 $14,856,164 $200,000,000 4% $9,986,807 $13,048,481 7% $10,491,320 $14,676,090 10% $11,027,677 $16,741,498 $230,000,000 4% $11,613,355 $15,173,684 7% $11,928,219 $16,686,139 10% $12,269,552 $18,626,833 Other Assumptions: Operation Cost Estimates: 2007-2008 2008-2041 $1,250,000/year $2,000,000/year State Appropriations 2007-2011 $20,000,000/year $100 million total

Spaceport Authority Revenue Bonds: Principal Year Issued Interest Rate Maturity $70,000,000 (For $170,000,000 Infrastructure cost) 1-1-2012 6.5% 30 Year

$100,000,000 (For $200,000,000 Infrastructure cost) 1-1-2012 6.5% 30 Year $130,000,000 (For $230,000,000 Infrastructure cost) 1-1-2012 6.5% 30 Year Miscellaneous Assumptions: Zero initial state operating subsidy funding on 1-1-2006, no federal funding Bond Sinking Fund Deferral: 10 Years Interest Income Rate (Sinking Fund): 4.1% Interest Income Rate (Cash): 3.6% Depreciation: Straight Line over 30 years with no salvage value Accounts Payable/Accounts Receivable: 30 days of operating expenses/revenue

Southwest Regional Spaceport 38-41 Business Plan by a yearly $20 million appropriation than $6 million per year.The critical from the State of New Mexico legislature question to be addressed is where the over a 5 year period starting in 2007 and breakeven revenues will come from and ending in 2011 along with $100 million whether they will be sufficient to meet of Spaceport Authority 30 year 6.5% these breakeven requirements. An coupon Revenue bonds issued in 2012. important issue not addressed here is the Sinking fund payments on these revenue potential for broad local and regional bonds are assumed deferred for 10 years. economic development benefits from the Operational expenses are estimated to be SRS staged infrastructure expenditures $1.25 million in 2006 and 2007 and $2 and the associated development of the million per year thereafter. It is assumed site. The multiplier effects of these that infrastructure costs are depreciated expenditures along with the both over a 30 year period with no salvage temporary and permanent increases in value and that accounts payable employment and associated tax revenues (receivable) are 30 days of operating generated for the state should not be expenses (revenues) respectively. ignored.

No other state or federal funding is 6.3.3 Action Items : assumed. Given a real cost of capital of 7%, yearly revenues of $10,491,320 1. Develop a plan to obtain startup would be required for the state to funds for infrastructure from the breakeven on its staged five year $100 state legislature. million dollar investment. Breakeven as 2. Develop a plan to produce used here is defined as a zero Net revenues from the spaceport. Present Value (NPV), which essentially Potential sources are facility means that the state is earning the lease/usage Fees, launch fees, X associated assumed real cost of capital Prize Cup Revenue Sharing, land on its five year staged investment. Note leases, and naming rights. that a real cost of capital is used since all the estimates are in 2006 constant 6.4 Operations dollars. Table 4 also shows the breakeven revenues required assuming a 6.4.1 Management deferred start in 2010 rather than 2006. Ownership of the spaceport is clear, in the sense that it will belong to the State Overall, the breakeven revenue of New Mexico. What is unclear, requirements in Table 4 monotonically however, is who is going to operate it. increase as the size of the infrastructure The New Mexico spaceport authority cost increases, as the real cost of capital together with the Office of Space increases and as the yearly revenue Commercialization must decide this receipt start date is moved back. It important question. The question is should be noted that even under an ideal whether the state manages only the situation of minimum infrastructure economic development aspects of the costs of $170 million, a 4% real cost of project, or, will they also manage the day capital, a 2006 revenue start date and to day operations of the spaceport. zero operational costs over the SRS life, the breakeven cash flows are still greater

Southwest Regional Spaceport 39-41 Business Plan The most straight forward of the options is that the state manages the spaceport 6.4.2 Facility Management itself. The benefit of this option is that A spaceport authority normally provides the state retains complete control over the following facilities, programs, and operations; however they do open up the services to its launch customers: possibility of liability in the case of accidents due to negligence. • Safety (including range safety and public safety) The second option is for the state to • Communications outsource the operation to a university • Propellants and gas handling with research and development as well • Laboratory and shop support as operational capabilities. The benefit • Meteorological Support here is that the facility remains under • Environmental Management state control and is run by a group which • has years of experience launching Physical Plant Maintenance • various missiles, balloons and Security • experimental aircraft. Institutional Support • Scheduling of Launches A third option is that the state • Conflict Resolution outsourcers the operations to a main customer. The state reduces their While the infrastructure plan is not part liability concerns in case of accidents, of this document, all design elements but loses control. must include consideration of these items. A fourth option is that the operation is outsourced to a large aerospace The management of the spaceport company such as Lockheed or Boeing. entails the management of the various The benefit here is that a large company services and products provided to has all the experience and resources one customers and the coordination of would need to operate a large and busy customer activities. facility. The downside is that the state loses control. 6.4.3 Ancillary Management Besides the management of the facilities Of these the two most viable options are that directly affect the primary users of for the state to operate the spaceport the spaceport, the management team itself or assigning control through a will need to coordinate all other types of management contract to a spaceport development at the spaceport. tenant. The former holds the advantage of assuring all users and tenants of the The vision of the spaceport includes facility fair use and access. However, facilities that span a wide range of this would increase risk borne by the possibilities. These possibilities may state and require hiring expertise it include theme parks, trip training currently does not have. Contracting facilities, space camps, amateur rocketry management of the spaceport would facilities, space related merchandise, minimize risk to the state, assure expert management, and enhance safety.

Southwest Regional Spaceport 40-41 Business Plan hotels with spas and golf courses, restaurants and other public quasi- 7.0 Summary and entertainment and supportive businesses that would develop around the site. Conclusions The new commercial space industry is In addition, educational opportunities very real as a business development can be developed on site or through prospect for entrepreneurs and economic outreach programs. A spaceport development opportunity for New museum should be developed and tours Mexico. Starting from suborbital freight of existing businesses should be operations, then evolving to suborbital developed. passenger operations, thereafter suborbital point-to-point flights for 6.4.4 Action items: freight and passengers, and finally orbital operations, the new commercial 1. Complete FAA/AST Licensing space industry is about takeoff; Process. 2. Complete necessary agreements Southwest Regional Spaceport can be a with the Bureau of Land catalyst for the industry and its Management. foundation in New Mexico. While all 3. Complete agreements with the research, gleaned from references and State Land Office. input from industry experts, suggests 4. Complete agreements with White that New Mexico take a phased Sands Missile Range. approach to investment and 5. Identify those ancillary development, it also suggest that the enterprises that will be included economic development return on the at the site. investment likely will be positive, 6. Develop a time line for the although subject to risk; under some development of ancillary scenarios, spectacularly so. businesses at the site.

Southwest Regional Spaceport 41-41 Business Plan